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Pursuant to a congressional request, GAO reviewed the operations of the Tennessee Valley Authority's (TVA) Office of the Inspector General (OIG), focusing on its duties, powers, performance, and independence.

GAO found that TVA OIG: (1) had audit and investigation powers and duties similar to those of other inspectors general; (2) reported directly to the TVA Board of Directors; (3) had unrestricted access to TVA records, reports, facilities, assets, and meetings, a separate budget, and the freedom to issue any report it considered necessary and desirable; (4) fully incorporated acceptable performance standards into policies and procedures; (5) took actions to improve communications with TVA managers and employees, report readability, audit and investigation planning, and audit follow-up; (6) satisfactorily complied with reporting requirements and audit and investigative standards; and (7) requested the transfer of some audit functions it believed involved program operating responsibilities to the TVA chief financial officer, although he had an inherent conflict of interest in assessing financial internal controls. GAO also found that the TVA Board of Directors: (1) established a minimum 3-year term for the Inspector General, but did not have to report to Congress on reasons why it did not reappoint an Inspector General for another term; (2) selected an individual outside of TVA to serve as Inspector General, and he selected his principal assistants from outside TVA; and (3) did not interfere with OIG work. GAO believes that there is no need for the President to appoint the TVA Inspector General, since the: (1) TVA Board adequately safeguarded OIG independence; and (2) Inspector General independently and objectively carried out his responsibilities.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: The Board of Director's July 29, 1989 resolution implemented the recommendation.

Recommendation: If the TVA Board of Directors appoints the Inspector General to a fixed term, the Board should amend its resolution to require that the Board report its reasons to Congress when the Board does not reappoint an Inspector General at the end of a term.

Agency Affected: Tennessee Valley Authority: Board of Directors

Status: Closed - Implemented

Comments: The Chief Financial Officer and the Inspector General agreed on May 11, 1989 that the finance office will not conduct audits.

Recommendation: The TVA Board of Directors should transfer the audit functions now being performed under supervision of the chief financial officer to OIG, except for audits of contractor records to resolve payment disputes.